Title: Contaminated land: bank credit risk for small and medium size UK enterprises

Authors: Thomas McDermott, Alan Stainer, Lorice Stainer

Addresses: Faculty of Continuing Education, Birkbeck College, University of London, Russell Square, London WC1B 5DQ, UK. ' Middlesex University Business School, Middlesex University, The Burroughs, Hendon, London NW4 4BT, UK. ' Business School, University of Hertfordshire, De Havilland Campus, Hatfield, Hertfordshire AL10 9AB, UK

Abstract: With the implementation of the environmental legislation in April 2000 in the UK, the paper examines how provisions relating to contaminated land might affect loan decision-making by financial lending institutions to small and medium size enterprises (SMEs). The potential for a borrower or lender to incur liability for the cleaning up of contaminated land is now real. An insight into how banks assess contaminated land risk is provided, taking into consideration that environmental risk assessment today is becoming part of the credit approval process. Yet, banks seem more worried about reputation risk rather than default or security risks. Many SMEs may not be able to obtain adequate funding from banks when purchasing property or using it as security for loans because of contaminated land risk and, hence, their financial viability may be jeopardised. Though there is organisational pressure for SMEs to take into account environmental concerns, a radical change in their attitudes and practices is needed towards these all-important issues.

Keywords: contaminated land; small and medium size enterprises; UK SMEs; bank credit risk; environmental management; sustainability; lending institutions; liability; environmental risk assessment; credit approval.

DOI: 10.1504/IJETM.2005.006504

International Journal of Environmental Technology and Management, 2005 Vol.5 No.1, pp.1 - 13

Published online: 17 Mar 2005 *

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